Standing Committee D

[Mr. Eric Illsleyin the Chair]

Clause 253

Private company not required to have secretary

James Brokenshire: I beg to move amendment No. 185, in clause 253, page 117, line 27, after ‘company', insert
‘which is entitled to the exemption conferred by subsection (1) or (2) of section 249A of the 1985 Act (exemptions from audit) in respect of its current financial year'.

Eric Illsley: With this it will be convenient to discuss the following: Amendment No. 248, in clause 253, page 117, line 27, at end insert—
‘( ) A sole director of a private company shall not also be secretary.
( ) No private company shall—
(a) have as secretary to the company a corporation, the sole director of which is secretary to the company;
(b) have as sole director of the company a corporation, the sole director of which is secretary to the company.'.
Amendment No. 186, in clause 253, page 117, line 28, after ‘company' insert
‘which is not required to have a secretary.'.
Amendment No. 249, in clause 253, page 117, line 28, after ‘company', insert
‘that does not have a secretary'.
Amendment No. 187, in clause 253, page 117, line 38, at end add—
‘(2A) In the case of a private company which does not have a secretary, if the company has more than one director, all of the directors shall have joint and several responsibility for complying with the requirements of the Companies Acts in relation to the company.'.
Clause stand part.
Amendment No. 188, in clause 254, page 117, line 40, after ‘company', insert
‘and a private company which is not entitled to the exemption conferred by subsection (1) or (2) of section 249A of the 1985 Act (exemptions from audit) in respect of its current financial year'.
Amendment No. 189, in clause 255, page 118, line 2, leave out ‘public'.
Amendment No. 192, in clause 257, page 119, line 14, leave out ‘public company' and insert
‘company which is required by section 254 to have a secretary'.
Amendment No. 204, in clause 263, page 121, line 30, leave out ‘public company' and insert
‘company which is required by section 254 to have a secretary'.

James Brokenshire: We move on to part 12 of the Bill and the important issue of company secretaries and their continuing role as a consequence of the provisions in part 12. May I welcome the Solicitor-General, as I understand he will debate and respond to various issues in relation to company secretaries? As Members will be aware, there has been considerable debate on this issue, particularly in the context of the continuing role of company secretaries in private companies as compared with public companies where the role of company secretary would be retained. I am sure that all members of the Committee will have received a number of e-mails and letters from various interested parties with their views.
The clause is central to that issue and I note the decision to incorporate the stand part debate intothe group of amendments that stand in my name and the names of my hon. Friends the Members for Huntingdon (Mr. Djanogly) and for Reigate (Mr. Blunt). That obviously gives us an opportunity to have a fairly wide-ranging debate on the current role of company secretaries and how the proposed regime would operate as currently contemplated in the Bill. Public company secretaries are to be recognised under the Bill, but not private company secretaries. We can therefore debate the practical implications of that and why we believe that it is not the best way to proceed because of all the issues that would flow from it.
It is helpful to give some context as to where company secretaries currently sit in terms of the corporate governance and corporate structures contained in companies up and down the country. The company secretary has an established and understood role in the context of English company law through a combination of statute, case law and years of custom and practice. A company secretary is an officer of the company by virtue of section 744 of the Companies Act 1985, is recognised and identifiable through notifications to the registrar of companies by virtue of section 288 of the 1985 Act and as an officer can be held to be criminally liable for defaults permitted by the company. The secretary may also have to make out a statement of the company’s affairs if an administrative receiver or a provisional liquidator is appointed or if a winding-up order is made by virtue of sections 47, 66 and 131 of the Insolvency Act 1986.
Although not formally prescribed by statute, company secretaries have responsibility for a range of administrative matters within the company for which they may be held liable in the event of default. Those include maintaining the statutory registers of the company, such as the register of shareholders, the register of directors’ interest and the register of charges, ensuring that the company keeps it statutory filings with the registrar of companies up to date, and ensuring that appropriate filings are made within the prescribed statutory time limits. I know that that is one of the key functions provided by company secretaries. It is important in ensuring that companies comply with their ongoing obligations under the Companies Act in terms of their relevant filings with Companies House, so that the filings are in order, and so that third parties can see precisely what is happening at the company.
Company secretaries are also responsible for co-ordinating the maintenance of the company’s internal records, such as minutes of meetings of the board of directors kept under section 382 of the 1985 Act, and minutes of general meetings of shareholders. They provide appropriate notification for convening board meetings and shareholder meetings, and they compile and circulate supporting documentation. Their role is very much that of ensuring that directors are properly up to speed with all board papers and of presenting and compiling board packs, so that directors are properly informed on what will happen at forthcoming board meetings. Secretaries in both public and private companies fulfil an essential role.
Secretaries are also involved in the quasi-legal situation of ensuring general legal compliance by the company with its statutory and legal requirements and adherence to its memorandum and articles of association. They co-ordinate the publication and distribution of the company’s annual report and accounts in conjunction with internal and external advisers and are involved in preparation and liaison with executive and non-executive directors to ensure that all appropriate statements are included and correct, and that all information is provided to the auditors.
Finally, secretaries process share transfers and the issuance of new share certificates, including signing of share certificates that are in hard copy format—though as we move to electronic means for holding and transferring shares that may decline in importance. They ensure that people who are entitled to do so can inspect company records.
I have taken some time to run through that background because it shows the breadth of the work in which company secretaries are involved and the importance within the general corporate structure of the role that they play in public and private companies in the UK. The point to stress is their position as formal office holders, which allows them to attend board meetings and gives them the added responsibility of the liabilities that attach to their office. Their position gives them a clear status and an ability to ensure that there is proper adherence by the company to its statutory and legal requirements. It enables them to have an important foothold in the board through their status and position, allowing them to be heard and to insist that compliance is maintained, whereas someone who was just an employee or an authorised signatory in a very defined role might not have the status and the role in the company necessary to ensure compliance.
The company law review recognised that position. It said:
“We do not doubt that company secretaries can provide a valuable service to private companies”
but proposed removing the mandatory requirement for a company secretary in private companies. It stated that the decision whether to use the services of a secretary would be made by the market rather than by law. It also said:
“We believe that private companies should be able, if they wish, to appoint a company secretary to carry out those functions that are ascribed to a director or secretary in the alternative in the Act, or performed by the secretary as a matter of practice. When appointed the secretary will be able to carry out these functions with the full authority that he has under the current Act.”
My understanding is that that scene-setting, in terms of the company law review and the views that were taken as a consequence of it, formed the basis of the provisions in part 12. The review proposed dispensing with the requirement for a company secretary for private companies. On my understanding, that was on the basis of deregulation—without any other justification—while recognising that removing the requirement to have a company secretary would not remove any responsibility of the company to carry out the functions that a company secretary would normally carry out. That approach was also reflected in both White Papers on the company law review.
However, that does not seem to be quite what we have in the wording of the Bill, which includes a subtle but vital difference from the suggestion that the secretary would have the full authority that he or she currently has under the 1985 Act. An article by Andy Hamer writing in the June edition of the Company Secretary summarises the point quite well. He states:
“Most public companies were fairly relaxed about the proposal to abolish the requirement for private companies to appoint a secretary on the basis that they continue to do so for their subsidiaries if they wish. Well nothing has changed in this regard. You will still be able to do that. The problem is that it will be a totally pointless exercise. The legal status of the person you appoint will not change one iota as a consequence of doing so. As far as the Company Law Reform Bill is concerned, that person will have no more power than your receptionist.”
That is one view. It is an extreme view, but it summarises the angst and concern that clearly exist in various corporate organisations throughout the country. Having just an authorised signatory role will not give existing company secretaries the standing and status that they have at present. Their ability to procure compliance on the various issues that I alluded to in my initial comments will be affected.
The approach that I outlined, which is reflected in Mr. Hamer’s comments, seems also to have been taken by Lord Sainsbury on Third Reading in the other place when he said that
“private companies will still be able to have a company secretary, but whether they so choose will not be material to third parties. That is why the Bill does not provide for them to have statutory recognition nor for their identity to be on the public record, either on formation of the company or thereafter.”—[Official Report, House of Lords, 9 May 2006; Vol. 681, c. 785.]
On the basis of what is in the Bill, the proposal, rather than being deregulatory, will impose additional regulatory burdens and confusion as existing company secretaries continuing in their role will have to be specially authorised to carry out their existing functions. As they are not recognised, they would have to become authorised signatories to do what they do today. For example, company secretaries have authority to authenticate documents under section 41 of the 1985 Act, but clause 48 of the Bill would require them to be authorised to do that.
Third parties will not wish to rely on a company secretary’s merely saying that they are authorised, and, in the absence of a continuing notification of secretaries at Companies House, presumably will wish to obtain a copy of the board resolution authorising the secretary to certify documents. However, a director would have to provide that duly certified evidence to the third party, as clearly the authorised signatory cannot self-certify.
Almost automatically there is the additional step of having a document executed by a director to give evidence to third parties that they can rely on the signature certifying the document. That will necessitate some additional step, but we will come on to that in further detail. The Under-Secretary said that her officials were examining methods of dealing with the situation in transitional arrangements. We touched on that point briefly last week when we talked about authorised signatories, and how—to paraphrase the Under-Secretary—that approach was being considered in the context of a transitional method under which existing company secretaries would be deemed as authorised signatories. She said, in general terms, that the proposal was still being considered by officials.
That approach does not address the fundamental weakness of the proposals set out in the Bill, however. It goes so far, but not far enough. The Institute for Chartered Secretaries and Administrators says in its briefing note for the Committee, which has been endorsed by the Association of Corporate Treasurers, the CBI, the Institute of Directors and the Law Society:
“Where the board of a private company wants the secretary to continue in his position post the enactment of the Bill, it will find that all the secretary’s automatic statutory powers under the Companies Act 1985 to certify documents, execute documents and file returns to Companies House will no longer exist. For any of the 2 million private companies which find their secretary useful, and want to continue employing such a person, there will be the confusing burden of having to set up appropriate authorisations to try and mimic the current statutory powers that are well understood. This new burden will bring complication not simplification. A secretary remains an officer of the company so his statutory powers should be clear along with his liabilities.”
The last point in that quotation, to which I alluded earlier, is the continuing status of the secretary in a private company as an office holder. I have referred to section 744 of the 1985 Act, which currently prescribes a secretary as being an officer of the company, although the continuing effect of that section is somewhat vague and I would appreciate any clarification from the Solicitor-General about it. What the table of destinations provided by the Department says about section 744 of the 1985 Act is quite interesting:
“Partially repealed, partially left in the Act without substantial amendment and partly replaced with substantive amendment by Various”.
It is quite difficult to track where the bits have gone or work out precisely what will happen to section 744, so some clarification of what will happen and how the Bill will apply to secretaries moving forward would be helpful.
What the Bill will mean for the status of a company secretary in the context of liability is a little confusing. The Bill raises the question whether the legal status of the post of secretary has been abolished from a statutory perspective for private companies. If someone was appointed as a new company secretary under the current wording of the Bill, but was apparently unable to notify their appointment to the registrar of companies under the new regime, third parties would not be put on notice of their position, so would they be an office holder or not?
By the contrary, if someone is shown in the records of Companies House to be a secretary of an existing company but there is no ongoing notification procedure for appointments or changes, how would they get themselves off the record, in order to avoid potential claims against officer holders of the company in the event of something calamitous happening to the company many years subsequent to their having relinquished their position as company secretary?
Practically, how do people ensure that notification is given to third parties, to ensure that they are not inadvertently and improperly drawn into a claim for default that might ultimately arise in criminal liability? The issue could be serious, so it would be helpful to have some clarification of what is intended in the Bill for the notification regime for private companies. I hope that we shall be able to shed some light on the issue.
My mystification about all this was heightened when I had as my bedtime reading further aspects of the Bill.

Mike O'Brien: Happy bedtime reading.

James Brokenshire: I am sure that we all have happy bedtime reading at the moment because of this weighty Bill. Clause 640 deals with annual returns. Clearly, filing annual returns and ensuring that they have been appropriately prepared is one role of a company secretary at the moment. Subsection (1) states:
“If a company fails to deliver an annual return before the end of the period of 28 days after a return date, an offence is committed by—
(a) the company,
(b) subject to subsection (4)—
(i) every director of the company, and
(ii) in the case of a public company, every secretary of the company, and
(c) every other officer of the company who is in default.”
If one assumes that the secretary of a private company remains an officer of the company, one could end up in quite a perverse situation, because subsection (4) states:
“It is a defence for a director or secretary charged with an offence under subsection (1)(b)”—
in other words, the provisions relating to secretaries of a public company—
“to prove that he took all reasonable steps to avoid the commission or continuance of the offence.”
The bizarre point is that that defence would not be available to secretaries of private companies if they remained officer holders of the company.
I will table an amendment about that, as we have not yet discussed the issue, but that lacuna or potential issue in terms of liability makes it extremely important that we are clear about whether a secretary of a private company, whether recognised on the statutory register or not—we shall come to that issue—is, as an office holder, liable and the extent to which they are liable. If there are occasions on which some form of additional defence is offered to public company secretaries, it will be perverse if that defence is not available also to private company secretaries, given that they will be fulfilling the self-same duties, although one group will be doing so in public companies and the other in private companies.
Any light that can be shed on the general issue—I have given a specific example—would be appreciated not only by me but, I am sure, by company secretaries up and down the country, who are concerned about the implications of what is happening.
I hope that the Solicitor-General can also respond to the comments of Andy Hamer in the latest edition of Company Secretary:
“The most embarrassing thing about this whole episode for the Government is the way that it went about securing the support of (or avoiding opposition from) listed companies and then moved the goalposts without consultation. I sincerely hope that it will be made to defend itself against such accusations.”
That goes back to the fundamental point, which is that the review seemed to suggest that the statutory rights of company secretaries would be preserved and therefore in the Bill, whereas we do not have that at the moment. An explanation or clarification as to why there has been a difference between the CLR, the White Paper and what we have now is important, because the reason certainly has not come out for me in reading the record of the debates in the other place. Perhaps I have missed it, but clarification as to why the subtlety that I have talked about was altered is important.
What about where we are now and the proposals in the Bill? What has been the response from companies up and down the country? I suspect that hon. Members will have received many letters and e-mails on the subject, and I think that it is worth commenting on some of the ones that I have seen. I appreciate that this is by no means the full list of representations that may have come into the Department and to other members of the Committee.
Elizabeth Richardson, company secretary of Reckitt Benckiser plc, a FTSE 100 company, said:
“While Reckitt Benckiser is a public company so will still be required to appoint a secretary, we have a hundred or so UK private companies within our group. If the Bill becomes law I will have no power to administer these companies for our group.”
She adds:
“The proposed changes will disenfranchise me and cause enormous administrative headaches for people in my position.”
A similar point is made by Tania Stoat, assistant company secretary of GKN plc, who says:
“In GKN, as is the case for most large UK-listed groups, the secretarial administration for subsidiary private companies is carried out centrally through the appointment of individual or corporate secretaries, thereby ensuring good corporate governance throughout the Group. The Bill as currently drafted will render such secretaries devoid of all statutory powers and require the imposition of unnecessary bureaucracy to delegate existing authorities in other ways.”
Finally, Hilary Lowe, company secretary to the investment trust of JPMorgan Asset Management, which obviously has to cope with a lot of administration, emphasises a similar approach and says:
“I appreciate that for small, simple companies the role of secretary is not necessarily needed, but there still may be instances where the Directors of these companies may wish to appoint a secretary in order to complete, lodge and explain the routine forms on their behalf...More worryingly is that there are large private companies where the role of secretary is vital and it is also important to note that within plc companies the majority of the work is done through subsidiary companies, which tend to be private companies, as the umbrella plc is merely the listed entity. Furthermore, if the Bill remains as drafted it is likely that companies will find themselves in the confusing position of having to delegate authorities in other ways.”
The point that Ms Lowe makes is crucial. For example, a listed company whose shares are traded on the London stock exchange would, as a public company, be required under the Bill to have a company secretary, but in essence it may be a shell or a holding company that holds the shares of various subsidiary limited liability companies.
In many ways the role of company secretary in that instance would be fairly limited in scope if it was ring-fenced at that level in terms of continuing compliance with the Companies Act 1985 as far as the plc is concerned and in terms of meeting the UK Listing Authority’s ongoing requirements. Yet in all likelihood, as some of the examples show, there may be hundreds of subsidiaries sitting underneath that holding company, all requiring accounts, forms and registration documents to be filed and updated and all trading. That would bring a different level of activity and the need for legal requirement and compliance. It is easy to see that the need for company secretaries and someone to be in charge of such activity is at subsidiary, private company level rather than being ring-fenced within the plc. That is important. Limited liability subsidiaries in such circumstances are likely to be considerable companies in their own right as the main trading companies for the listed group and may have turnovers of hundreds of millions of pounds, so the need for compliance is significant. Perhaps that aspect has not come across clearly enough in terms of the importance of maintaining compliance at that limited liability perspective.

Jonathan Djanogly: My hon. Friend makes an important point about the Government’s application of company secretaries who are often undervalued. There could be a flotation of a series of foreign operating companies in London. A listed company may exist in London but it may be a shell and the operating companies, some of which may be English constituents, may operate overseas. That is when the clause will not work.

James Brokenshire: We could also have the perverse situation of a foreign-listed company—a holding company that is incorporated outside the UK—being the listed entity that holds shares in a subsidiary which is a trading company in the UK. Clearly the listed holding company would be outside the UK, under no obligation to have a secretary at all. Under the new regime, the subsidiary company would have no responsibility or liability to have a secretary. That seems a rather strange situation to have arrived at in ensuring good corporate governance at a time when there are huge sensitivities about such issues and about ensuring that companies are in compliance with their regulatory obligations.

Jonathan Djanogly: My hon. Friend uses the word “strange”. With respect—he is making an excellent case—should he not be a little stronger? Rather than strange, is not the situation unacceptable?

James Brokenshire: I am grateful to my hon. Friend. I suppose I was using the word “strange” to mean peculiar, bizarre and extremely ridiculous in terms of the guidance that we set for corporate entities across the globe. I shall come later to the international aspect. The situation is not acceptable, and when we turn to the amendments, we shall see that different approaches can be taken. I know that the various bodies have had their views, discussions and debates on the right way forward, which clearly needs to be focused on. I do not think that it has yet been properly addressed.
As a further example, I have one final comment from Sue Jenner, director and company secretary at the Thomson Corporation plc:
“MPs would appear not to be aware of the seriousness of this issue and I urgently request that you seek to redress this anomaly. Does the Government not realise how damaging this could be to large private companies with numerous operating subsidiaries, who rely on their secretaries to ensure good governance and, in particular, to facilitate the day to day legal administration of these entities. Stripping away their powers could cause untold difficulties, especially where certifying/authenticating documents, executing documents with a director and filing returns at Companies House are concerned”.
She adds:
“It will be far more burdensome and crippling for companies if the Bill is left as drafted. In the cause of good governance, it is absolutely critical that company secretaries not be stripped of their powers.”
It is interesting that under the proposed arrangements it would be possible for many subsidiaries to sit underneath and not to have the corporate powers behind the secretary in that context.
I was looking at the list of representations that I have received through e-mail and correspondence during the past week or so, and it makes for interesting reading: GKN plc; Anglo American plc; the Association of Women Chartered Secretaries; Harbottle and Lewis solicitors; JPMorgan asset management; First Choice Holidays; the Thomson Corporation; Hamilton Downing Quinn solicitors; Argos Retail Group; Mothercare UK Ltd; Vocus Europe Ltd; Mayer, Brown, Rowe and Maw solicitors; National Express Group; Virgin Group Ltd; Taylor Wessing solicitors; Renew Holdings plc; Mitchells and Butlers plc and Lovells. Various other companies and individuals have expressed their concern, too. There is considerable angst and worry about the implications of what is happening and the practical difficulties that might be posed to such companies by the structural change between the private and public company settings.
It is also interesting to work out how Companies House will respond in all such circumstances, given what I have said about the fact that company secretaries’ names would appear to remain on the register going forward. If secretaries in private companies were not authenticated and authorised to deal with the filing of forms after the introduction of the Bill, how would Companies House deal with the situation? I know that transitional provisions are still being considered, but there could be a nightmare at Companies House if that is not followed through properly. I believe that changing our current position is the best way in which to achieve a sensible arrangement and settlement.
My hon. Friend talked about the international aspect. At a time when we appear to be seeking to downgrade the position of the company secretary, certainly in limited liability companies, other jurisdictions appear to be embracing the corporate model that we have created and adopted for many years. Certainly, in developed and emerging markets, the adoption of our corporate governance structures and business behaviour are seen as key elements in the drive to attract investment.
It is therefore interesting to note that jurisdictions such as Spain and Dubai have gone in the other direction and are seeking to adopt a requirement for a company secretary. I have been provided with some correspondence from Transeuropean Centre Ltd, which is in discussion with the Institute of Chartered Secretaries and Administrators, stating:
“The UK corporate law is highly regarded in Russia, especially the role of company secretaries within large companies.”
The suggestion is that Russia is examining our corporate model and structure. Although it is seeking to adopt secretaries at the moment, the suggestion is that it might be trying to find ways in which to codify and structure company secretaries within Russian corporate law. It is great to see that that wonderful benefit in English corporate law is being exported far and wide. It is one of the great benefits in this country, and it is a hidden export. That is great to see. Our corporate governance structures, in which the company secretary plays a pivotal role, should be promoted.

Mike O'Brien: I have listened carefully to the hon. Gentleman’s points. I think that he has covered the representations of just about every lobby group that has deluged the Committee. However, I have not yet heard him say anything about his amendments, and I would be grateful if he could tell me about what they propose.

James Brokenshire: As the Solicitor-General is well aware, we are in the midst of a clause stand part debate, as well as discussions on the amendment. I am using the stand part debate as an opportunity to set out a number of important concerns expressed by company secretaries and corporate organisations up and down the country. I therefore think that we should use this opportunity to set out that context, but I shall come on to the amendments; he can be assured of that.

Jonathan Djanogly: May I say how pleased I was to hear the Solicitor-General refer to the many concerns shown by lobbyists, the CBI and company secretaries? We have all been inundated with letters from company secretaries who are concerned about the proposals, and I congratulate my hon. Friend on dealing with those concerns so thoroughly.

James Brokenshire: I am grateful for my hon. Friend’s comments.

Shailesh Vara: May I remind the Committee that last week, it was the Minister who was keen to emphasise that, because so many people had contributed and she had taken their views on board, we should not be engaging in that debate? I hope that the Solicitor-General will take that point on board. I mention it because I am mindful that at that time he was engaged in another Committee. We are doing only what the Minister asked us to do—take on board the various views given to us by various bodies.

James Brokenshire: I have sought to take a bit of time and care in Committee this afternoon because the representations are so recent. That is why it is important that we have the chance to give them a proper airing. In many cases, the representations arrived only in the past few days—indeed, the last few hours. Even as I came to the Committee this afternoon, my I was still receiving e-mails from people concerned about the issue.
I want to finish on the international aspects. I was interested to read the letter from the Hong Kong Institute of Chartered Secretaries, especially as Hong Kong corporate law is historically modelled on English company law and largely remains so today. The letter, which is from Mr. Richard Leung, the president, reaffirms that
“if the abolition of the requirement for private companies to appoint secretaries is to go ahead, secretaries of those companies which choose to appoint or retain them should continue to be given the statutory powers and their appointment should be a matter of public record at Companies House.”
We will come to the last point in discussing another group of amendments, but the letter gives some further international context by noting the potential influence and impact that the UK reforms will have on other jurisdictions, including Hong Kong. Although I fully recognise that we are talking about UK corporates and the UK situation—and rightly so in terms of the UK remaining an example that we hope will be followed by others—it is worth putting it in that international context.

Margaret Hodge: I am just wondering if that reference was the hon. Gentleman’s Eccles cake moment, and which Opposition Member he is waiting for to come here and vote this afternoon. We are now 40 minutes into the afternoon’s proceedings and we have not yet touched on any of the amendments.

James Brokenshire: To be honest, Mr. Illsley, that comment was ill judged and inappropriate. We have had to put up with all sorts of filibustering by the Government because they have not been able to get Members to attend this Committee. I am in no way filibustering; I am making a genuine attempt to run through extremely important issues that deserve proper debate. I will take no lectures from the right hon. Lady on issues of that nature.
Last week, the Minister indicated that existing company secretaries—

Shailesh Vara: The various bodies that have taken the trouble to contact all members of the Committee will no doubt form their own opinion of what the Government think of their view, in view of what the Minister has just said.

James Brokenshire: I thank my hon. Friend for his intervention. This is a very important issue, as is evidenced by the amount of correspondence we have received on it.

Nick Palmer: As a relatively new member of the Committee, replacing my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins), who has a medical problem, I have had no correspondence on the matter. I wonder whether the hon. Gentleman can quantify his remarks. How many lobbyists have contacted him on the subject? His hon. Friend the Member for Huntingdon said that there had been numerous lobbyists.

James Brokenshire: Whatever the Minister may think, I do not intend to run through in great detail the number of groups that have contacted the Minister and other members of the Committee. I went through the list of companies, company secretaries, plcs and other limited liability company secretaries and accountants who had contacted us. That is clear evidence of the situation.

Nick Palmer: My question was specifically about lobbyists, as that is what the hon. Member for Huntingdon referred to. How many lobbyists have contacted him on the subject?

James Brokenshire: I am not aware of any lobbyists. I do not know what the hon. Gentleman means by using that term in such a context. I was contacted by the companies that I mentioned, and the Institute of Chartered Secretaries and Administrators made its representations very clear. I can only imagine that my hon. Friend the Member for Huntingdon may have been alluding to them. It is interesting to note that the view of the ICSA is endorsed by the Institute of Directors, the Confederation of British Industry and various other organisations, as I am sure the Solicitor-General is aware from the briefing materials that he has received.

Mike O'Brien: That is an organisation that I know reasonably well, and it is a very reputable one. We have had representations from every lobby group, varying from interests in Hong Kong to those in Russia. It is emerging that the Conservative party is the party of various lobbyists who, at some stage, have written a letter to Conservative Members, who are just reading out parts of that letter. It is fine to make sensible points—the hon. Gentleman has raised several, and I am happy to deal with them—but I am concerned that he seems to be going through his list of lobbyists as though he wanted to check off with them that he has mentioned them all.

James Brokenshire: I have never heard anything so ridiculous in my life. We are trying to debate a sensible and serious issue. The suggestion that in some way—

Eric Illsley: Order. I think that it is time that we returned to the serious issue.

James Brokenshire: I am grateful for that guidance, Mr. Illsley.
Last week the Under-Secretary said that existing company secretaries of private companies might or might not be deemed to be authorised signatories by virtue of their office, while appearing to rule out such an approach for new company secretaries, saying that transitional provisions were still a little up in the air. Her comments maintain the view that secretaries of private companies should effectively be phased out. That is mistaken and potentially confusing, particularly in large groups of companies where new subsidiaries may be formed regularly, some of which might fall within transitional provisions while others—new ones—might not. A more fundamental approach needs to be taken.
Amendment No. 185 proposes that private companies not entitled to an exemption from audit for the purposes of subsections (1) or (2) of section 249A of the Companies Act 1985 should be required to have a company secretary. The subject was debated at length in the other place and I do not propose to rehearse the arguments again. Amendments Nos. 186, 188, 192 and 204 make further consequential changes.
Amendments Nos. 248, 249, 187 and 189 make what might be termed “flexibility changes” to enable the continuing statutory recognition of the private company secretary. They reflect the views adopted by the CLR and backed by the Institute of Chartered Secretaries and Administrators.
The role of the company secretary is well understood, and it is welcome that as far as plcs are concerned, it will be retained. However, it is bizarre that the concept has been completely cast aside, as far as statutory recognition is concerned, for any private company. The secretary supports the board and the executive team in their primary objective of wealth creation, and allows the sophisticated obligations and functions of companies of all sizes to be discharged effectively. Importantly, the secretary’s role is widely understood and enables third parties, via Companies House, to know not only that the secretary has power to sign on behalf of the company, but that that person is at the heart of the board process.
The Bill’s most worrying message is that compliance is in some way being downgraded. ICSA says that it is already receiving reports of smaller companies misinterpreting the proposals as a reduction in obligations to comply, to complete returns and to fulfil a wide range of functions. To amend the Bill either to require large private companies to maintain a company secretary or to give all private companies the ability to appoint or retain company secretaries to whom the existing statutory powers would be available does not appear to be overly difficult. I am happy to accept any suggestions or improvements to the drafting of our amendments. To do so would avoid placing the costly compliance and bureaucratic burdens on companies throughout the country which will result from adhering, without any change, to the current arrangements and structure.
In our first sitting, the Minister for Industry and the Regions said:
“the Government are very open-minded in our approach to the Bill. The provisions are in good shape, but we are always anxious to improve them. Certainly, during the discussions that I had in the past month with my officials, we found that there is always room for improvement in a Bill of such an enormous size.”—[Official Report, Standing Committee D, 15 June 2006; c. 3.]
Providing greater structure for the role of company secretaries would provide such an improvement.
To date, the Government appear, for whatever reason, to have approached the matter with a closed mind. I hope that today they will open their eyes and finally recognise the important continuing role of company secretaries in private companies.

Mark Hunter: May I say what a pleasure it is to make my first but, I hope, not my last contribution to this marathon Bill under your chairmanship, Mr. Illsley? Right hon. and hon. Members will be delighted to know that my contribution will not take 45 minutes; it will be more like four and a half minutes. I hope that we can proceed somewhat quicker than we have done so far.
If I understand the hon. Gentleman, the basic point of the Conservative amendments is that only small companies should be exempt and it should be made clear that private companies are allowed to have secretaries if they want to. We are not unsympathetic to that view. The key question is whether the company secretary’s function is solely to protect the interest of potential investors or to go further than that, and for example protect the interests of creditors, too. If the function is to protect only potential investors, the Bill is right to draw the distinction between companies that need a secretary and those that do not, as between public and private companies. However, if the function goes beyond that and the protected interests go beyond those of investors, it might be appropriate to use other criteria. The argument for using the size of the company is that one of the main functions of the company secretary is to maintain the integrity of the company’s system of governance.
In practice, the company secretary’s job is to hold the ring between the directors, the shareholders and the creditors of the company, with creditors including employees. Their job is to represent the interests of the company as a whole, which might include reminding the directors that they are supposed to act in the interests of the company as a whole, not their personal interests, and take account of the interests of company members. In small companies, the distinction between the interests of the directors, or the director and the shareholders, can be theoretical, but as soon as it is meaningful to speak of shareholders as a separate interest from that of directors, it makes sense to require companies to have company secretaries. The key issue is how that idea is put into practice.
The distinction between companies that are required to undertake an audit and those that are not might make some sense in that context. It relates to the difference between companies in which the members are so closely connected with the management that they can be assumed to understand what is going on, and those in which members are likely to be a separate interest and unconnected with the management of the business.
Admittedly, there is a problem about whether the criteria in the 1985 Act are right. The amendment sets the limit at £5.6 million or more in turnover or £2.8 million or more in gross assets for private companies not involved in insurance or financial services. Do those criteria set the limits of concern about corporate governance, and is £5.7 million so different from £5.5 million in that sense? There must be a limit somewhere, and all numerical limits are arbitrary to some extent. The real question is whether exemption from a requirement to audit is in principle the same as an exemption from a guarantee of rectitude in corporate governance. Arguably at least, they are the same, and the requirement for an audit takes hold when the company’s affairs are complicated enough that an outsider is needed to help maintain trust between the various interests. That seems close enough to the situation in which a guarantee of the integrity of the company’s governance system is needed.
For those reasons, we support the amendments tabled by the hon. Member for Hornchurch (James Brokenshire) and his colleagues.

Nick Palmer: I draw attention to my entry in the Register of Members’ Interests for a very small family company in which I am involved.
Some of the arguments advanced in favour of the amendments suggest that the Bill would make it illegal for private companies to have secretaries. That is not true. It is a deregulatory proposal so that companies that do not feel the need for a secretary do not have one imposed by legislative fiat. I find it strange, the Conservative party urging that life be made more difficult and complicated for private companies. That is my only point.

Shailesh Vara: I declare an interest as a member of the all-party group on corporate governance—I mention that to the extent that it is relevant and in case anyone should ask. I want to thank all the contributors who have taken the trouble to contact me and other Committee members. I, for one, make no apology for referring to some of those contributions.
Where a private company wishes to have a company secretary, then it should be allowed to have one, and with the existing powers in statute. [Interruption.] The Government Whip, the hon. Member for Birmingham, Hall Green (Steve McCabe), says that they are still allowed to do so but, he will note, not with the existing powers. That is one of the two fundamental issues under consideration.

Eric Joyce: The hon. Gentleman is missing the point. Of course private companies are allowed to do that. Company secretaries can be given the powers by the company. The powers are not being taken away; there is still a requirement. It is quite clear. They can still do the same thing, but not by virtue of having that professional qualification.

Shailesh Vara: I hear what the hon. Gentleman says. If he will allow me to continue, I will cover why it is important to continue with the existing powers rather than for the 2 million companies that have company secretaries to face an additional burden by having to decide whether they should have a company secretary and, if so, what powers, if any, they would give to them.

Margaret Hodge: We are completely astounded by the odd use of the word “burden” in what is essentially a deregulatory measure. I know that we all have to be careful in our use of English, but will the hon. Gentleman for heaven’s sake explain how taking away a regulatory requirement for companies to have a company secretary—by deregulating and leaving it as an option—can in any way be described as a “burden”?

Shailesh Vara: I am more than happy to enlighten the Minister on the so-called deregulatory measure. The company secretary has statutory duties—various administrative duties—which my hon. Friend the Member for Hornchurch so clearly expressed. If one removes company secretaries, the company will have to delegate those responsibilities to some other body or individual, which will create more work.

Mike O'Brien: The hon. Gentleman seems to be arguing that we need more statutory regulation of private companies, even small ones, and we should not give them the choice to decide who should have the authority to do the various tasks. The Government are on the side of allowing private companies to have the choice. It appears that the Conservative party wants more regulation.

Shailesh Vara: I am not talking about the corner shop, which has a small revenue and for which there might well be more burden, but about a large number of private companies. Indeed, it has been mentioned that it could include many listed companies, where effectively the bulk of their business is carried out by various subsidiaries which carry out a substantial amount of business. The business of the company secretary is fundamental. I am referring to such companies, not necessarily to the small company where it can be a burden. I do not deny that for some companies the company secretary is perhaps superfluous—

Margaret Hodge: Hear, hear.

Shailesh Vara: Would the Minister like to contribute?

Margaret Hodge: I absolutely agree with that assertion. If the hon. Gentleman accepts that there are situations which are inappropriate for a company secretary to deal with, why on earth is he not supporting the proposition that we deregulate this particular burden on companies?
Let me ask the hon. Gentleman another question. [Interruption.] It is not a speech; it is an intervention. To which statutory duties is he referring? Which duties is a company secretary responsible for that will have to be passed to somebody else should the necessity for a company secretary no longer exist? I am unclear that there are any.

Shailesh Vara: The Minister obviously missed a large part of the speech by my hon. Friend the Member for Hornchurch and has clearly not quite got the thrust of where I am going. Indeed, it is ironic that the Government accuse the Opposition of procrastination, yet Labour Members’ questions all seem to indicate that they have not paid any attention to anything that we have said so far. My argument is that companies should have the option to have a company secretary if they want one, and the majority of companies will probably want one. Yet the Minister seems to be basing her argument on the strength of a small number of companies for which company secretaries may not be relevant.

Nick Palmer: Will the hon. Gentleman give way?

Shailesh Vara: I should like to make progress.
There is merit in the Government’s argument that there should not be a blanket requirement for all private companies to have a company secretary, which in some cases is a mere box-ticking exercise, but we should allow for companies to have and to appoint a company secretary if they so wish, with the existing powers as they are. It is interesting that Labour Members were happy to nod their heads in agreement when I said that private companies should be allowed to have a company secretary, but as soon as I mentioned that they should be allowed to have company secretaries with the existing powers there was a blank look on their faces and no nodding of heads.

Mike O'Brien: I should be grateful if the hon. Gentleman would enlighten us by setting out precisely the statutory powers that he claims currently exist for company secretaries.

Shailesh Vara: There is the authentication of documents. Statute provides that a company secretary is an office holder and as such has responsibilities and liabilities. There is also the requirement—I do not know whether it is a statutory requirement—that there is a register of secretaries at Companies House.

Justine Greening: I am impressed by my hon. Friend’s ability to respond to questions from Ministers. I hope that we will have no more writing of notes when our questions cannot be answered, and perhaps we will get similarly factually correct and exhaustive responses from Ministers.

Shailesh Vara: It does seem that the Government are happy to fire salvos in our direction knowing that we do not have the back-up of civil servants eagerly writing notes to us. It is ironic that they are constantly being supplied with notes. I take it on the basis of their contributions so far that Ministers will dispense with all advice, jottings and notes and rely on their own knowledge and experience.

Mike O'Brien: The hon. Gentleman is trying valiantly to defend his position and I respect him for that. He has a good record in the House. He is seeking to defend virtually the indefensible in the sense that there is a claim that there are statutory powers that he cannot ascribe, and nobody else can either. I appreciate that we have advice from others, but he is making a strong point and accusing the Government of doing something. We are merely trying to get him to be precise about that. We do not think that he can be, and I think he accepts that. The thing to do now is to move on. Once in a hole, it is best to stop digging.

Shailesh Vara: I am grateful to the Solicitor-General for those comments. I do not agree with them. In the interests of making some progress, I should like to continue. I hold to my original view. Those who listen to my speech or read the record will doubtless form their own opinion as to which one of us is correct.
Having a company secretary also has the benefit of giving certainty to third parties about who specifically in a company is charged with the responsibility of complying with statutory requirements, dealing with corporate governance and ensuring co-ordination between directors, shareholders and various departments within the company, and so on. The notion that anyone who wishes to contact a company should simply write to a director negates the argument for proper corporate governance. It is important that there is a specified individual who is an officer of the company and that third parties know with whom they are dealing.
If there were not a company secretary, the directors would be burdened with the responsibility of form filling and dealing with changes in shares, changes in directors, changes of address and so on. The job of directors is to run a business and develop it. They do not wish to be bogged down with the detailed requirements for the proper efficient running of a company, so it is important that a company secretary can take on the responsibility of the administrative duties while the company directors get on with the business of developing the company and expanding it in what is a cut-throat and competitive business world.
My understanding is that the aim of the Bill is to simplify matters and to allow people to get on with running businesses. By putting the additional burden of dealing with administrative duties on directors, as opposed to a specific individual, it will act as a hindrance to proper business efficiency. My hon. Friend the Member for Hornchurch referred to plcs, which have many subsidiaries that are private companies and, thus, need company secretaries. There are also many large private companies that would qualify for listing, if so they wished, in which the role of the company secretary is vital. We must not forget that. If a company secretary’s duties were dispensed with, authority would need to be delegated to other individuals to fulfil the company secretarial role. It is important that third parties know who that person is.

Nick Palmer: Does the hon. Gentleman accept that, if a private company feels, as he does, that it would be burdensome not to have a secretary, and takes no action and maintains its existing secretary with the existing corporate duties, there will be no additional burden?

Shailesh Vara: That may be the case for companies that wish to do that, but we are in the business of providing for new companies, too. The purpose of the Bill is to consolidate and ensure that, since 1985, company law is up to date. It is our duty to take into account new companies that will be set up in the next 20 or so years, which is why it is important to have certainty and not necessarily deal exclusively with existing companies and their current frameworks.

Margaret Hodge: The hon. Gentleman makes an interesting point. We are genuinely in some difficulty. ICSA has put forward some good arguments, so I am not sure that he has done it justice. Given his political party, I find it odd that he might seriously be suggesting that the Government should prescribe precisely how new small companies administer their business and meet the regulations by insisting that certain of their functions are carried out by specified named individuals, be they company secretaries or otherwise.

Shailesh Vara: I was happy to give way to the Minister, as always, but it is regrettable that, as usual, she has missed the point. When legislators are in the business of setting out legislation, it is important that they try as best as possible to cover future eventualities. I am not saying that we should deal with the minutiae, but we should cover the future, to the extent that that is possible.
Only when companies get over the appropriate threshold should proper auditing come into operation. That is the answer: only when companies exceed the proper audited limits should the rules kick in. No doubt some legal and accountancy practices would welcome the additional work that will be created for them, not to mention the additional costs that companies will have to bear in giving them the work and paying their extortionate rates.
My hon. Friends the Members for Hornchurch and for Huntingdon referred to the importance of being able to deal with company secretaries based in Britain when company directors are overseas. In an increasingly international business environment, we must recognise the need to have a specific person in the UK to whom third parties can turn to ensure proper corporate governance of a company, as well as proper service of notices, proper filing of documentation, and so on. There are many private companies, and company secretaries are crucial in ensuring their compliance with the proper requirements.
Company secretaries also have an important role as co-ordinators of internal company departments. As the hon. Member for Cheadle (Mark Hunter) mentioned, they are a link, and we must not overlook their importance in that role. As a former practising solicitor, I remember that on occasions I used to speak to company secretaries. We would not necessarily discuss a particular issue ourselves, but the company secretary was the one person with whom I could liaise, and he would agree to speak to the various departments in the company and give me the answer that I wanted. In the business world it is important that banks, lawyers, accountants, architects and so on have an individual whom they trust and with whom they can develop a working relationship to progress business.
Let us not overlook the role of non-executive directors in recent years. A number of reports have emphasised the importance of having independent non-executive directors, and we regularly see very able directors with a large portfolio of non-executive directorships. It is important that in that context a company secretary can advise each of them properly on the relevance of business practice for the company with whom that secretary is concerned, rather than the eight or nine other companies with which they have non-executive directorships. If the burdens and responsibilities of non-executive directors are to be increased—as they are—it is important that they are properly monitored and that there is an individual to do that monitoring. That should be the company secretary, who does it now and should continue to do so.

Mike O'Brien: The hon. Gentleman repeatedly uses words such as “vital” and “crucial”. Is he saying that in no case, when one is dealing with medium-sized private companies, should the company have the choice of whether it wishes to have a company secretary? A corporation that controls a private company of the sort described may choose not to have a company secretary, but instead to have others authorised to do the tasks. Would he deny them that choice because it is “vital” and “crucial” that they should not have that choice?

Shailesh Vara: The Solicitor-General makes a valid point. As long as all the administrative duties that a company secretary fulfils are carried out by the company, I have no problem. The problem, however, is that many companies need to have the option, rather than have company secretaries dispensed with, as is proposed. The Solicitor-General looks perplexed.

Mike O'Brien: I am listening carefully and I am indeed a little perplexed. Let me repeat my point. The hon. Gentleman believes that no choice should exist for medium-sized private companies. We are dealing with SMEs, and Opposition amendment No. 185 relies on section 249A of the 1985 Act, which essentially distinguishes between small and medium-sized companies in accountancy terms.
James Brokenshireindicated assent.

Mike O'Brien: The hon. Member for North-West Cambridgeshire (Mr. Vara) will see that the hon. Member for Hornchurch is nodding. Essentially, the hon. Member for North-West Cambridgeshire is making a distinction and saying that medium-sized private companies should not have choice set out in the Bill. Is that his point or is it not?

Shailesh Vara: I stand corrected. To clarify, I am saying that we should have company secretaries for medium-sized companies. When I say that there should be an option not to have a company secretary, I have in mind small companies and the corner shop, which already have enough burdens.

Mike O'Brien: That is precisely the issue on which I want to narrow down the hon. Gentleman’s argument. Is he saying that there is no situation in which he would allow medium-sized private companies the choice of whether to appoint a company secretary? That seems to be the argument that his Front-Bench colleagues have made, but is he seriously saying that he would insist on regulation and deny such companies the freedom to choose how they appoint people and regulate themselves?

Shailesh Vara: The criteria for qualification as a medium-sized company are that turnover should not be more than £22.8 million, that the balance sheet total should not be more than £11.4 million and that the number of employees should no be more than 250.

Mike O'Brien: I know the criteria, but what I want to know is whether the hon. Gentleman is saying that there is no circumstance in which he would allow private companies that exceed those levels to have the choice set out in the Bill. Is he saying that they should be denied that choice?

Shailesh Vara: That is the way that the amendment reads, so, yes, that is the case.
It is not in the public interest—[Interruption.] The hon. Member for Falkirk (Mr. Joyce) is very keen on making comments that are just below the audible level. If he has anything credible or valid to say, I hope that he will make his contribution audible so that it can be put on the record, rather than constantly muttering so that it falls just below the radar. As I was saying, it is not in the public interest to create an additional administrative burden on directors, who have other duties and who do not need to be filling in forms, co-ordinating departments and so on. It is important that we let companies decide whether they want a company secretary, and we need a register of secretaries at Companies House so that it is clear to all third parties who is responsible for the various administrative duties and whom they can contact immediately.
There is an increasing focus on transparency and good corporate governance in business, but that is undermined when we seek to diminish the role of the one person who can be held accountable for high principles of corporate governance. As I mentioned earlier, there are 2 million private companies, all of which are subject to statutory requirements, proper corporate governance codes and guidelines issued by various company bodies. Company secretaries play a useful role in such companies, and doing away with that role will mean confusion and will impose the burden of setting up appropriate authorisations to duplicate the current statutory responsibilities.
To conclude, company secretaries play a vital role—I repeat the word “vital”—in the efficient running of companies and in our legal framework. We should seek to retain them and give them the necessary authority and power properly and effectively to do their job.

David Jones: I do not propose to detain the Committee too long, because on the general thrust of the arguments there is little separating the Government and the Opposition. The Opposition are just as much—possibly more—in favour of deregulation than the Government. By the same token, I imagine that the Minister and the Solicitor-General recognise the importance of company secretaries to good corporate governance.

Mike O'Brien: I am struck by the curiousness of the hon. Gentleman’s comment that his party, in proposing the amendments, which would insist on more private company regulation than the Government’s proposal, are more deregulatory than the Government. Will he clarify that? On the face of it, it does not make any sense.

David Jones: I shall expand on my argument later. My point is that the Opposition and the Government are in favour of greater deregulation. [Interruption.] Does the Minister want to intervene?

Margaret Hodge: For the sake of time, I shall not.

David Jones: We will touch on that issue later.
The Government recognise the importance of company secretaries to good corporate governance. Were that not true, the Government would not have made it necessary for public companies to appoint company secretaries. I shall not rehearse at length the benefits of company secretaries; my hon. Friend the Member for Hornchurch and other contributors have already touched on them adequately. Save to say, company secretaries fulfil an important role to ensure that directors toe the line and operate within the bounds of their responsibilities and duties, and to assure persons such as creditors and shareholders who deal with the company.
We are not a million miles apart, but we need increased regulation of private companies with an annual turnover of £5.6 million or more. They are not small, although they only just exceed the definition of small enterprise. A company that has a turnover of £5.6 million a year is by any stretch of the imagination a significant enterprise. It probably has a large number of employees, it will undoubtedly enter into obligations, and creditors and others will deal with it regularly. The existence of a company secretary who fulfils their statutory duties, and other duties not so closely defined by statute in this Bill, would be a huge reassurance to those individuals.
Many private companies are very large. Theexample given on Second Reading was John Swire and Sons, which is an enormous company with morethan 130,000 employees and a turnover of about£2.3 billion. It is inconceivable that such a company would not appoint a company secretary.
Margaret Hodgeindicated assent.

David Jones: I see the Minister nods as if to say, “All such companies are quite at liberty to appoint such an individual.” However, I find it hard to understand why such a large and significant enterprise—with a huge turnover, thousands of employees and, presumably, obligations that run into millions of pounds—is not required by the Bill to appoint a company secretary, whereas a public company that may have a significantly smaller turnover is. That is the nub of the argument between the Government and the Opposition in this Committee.

Lorely Burt: Would the hon. Gentleman not agree that there is a balance to be struck among not only the interests of the company and its directors but, for a certain size of company, the interest of others, which should be differentiated? Although none of us on this side of the Committee desires to introduce or allow any more regulation than is required, we still think that a balance that acknowledges the interests of the different parties should be represented in a regulatory sense.

David Jones: The hon. Lady is entirely right: it is a question of the size of the company. Again, to take the Swire example, it would be extraordinary for a company with 133,000 employees not to have a company secretary.
I fully understand that the Government will say that it is open to such companies to employ secretaries. In the case of such a large enterprise, where so many interests are at stake, it should be mandatory for a company secretary to be appointed. That is not regulation for the sake of regulation, but simple logic. It is ridiculous that a small public company should be obliged to appoint a secretary, whereas a huge private company should not. That is the nub of the argument, which I think is unanswerable. I can see no good reason for the argument, which Lord Sainsbury advanced in another place, that a private company of that size should not be required to appoint a company secretary. That is the main thrust of the Opposition’s amendment.

Nick Palmer: The argument has moved a little more in the direction of rationality because the hon. Gentleman is not arguing, as his colleagues did, that being forced to give up secretaries would be a burden on companies, because he accepts that they would not be forced to do so. He is saying that companies should be required to have secretaries in the wider interest if they are of a certain size, but is he arguing that there should be no difference in law between the duties placed on private and those on public companies?

David Jones: Clearly that is not what I am arguing, because I am supporting the amendment. I openly acknowledge that a small company—what my hon. Friend the Member for North-West Cambridgeshire referred to as a corner-shop company—should not have the same degree of onerous obligations as a larger company. However, by the same token, it seems quite illogical that enormous private companies, of which there are many, should not be subject, in the interests of good corporate governance, to the appointment of a company secretary. That is the simple basis of the amendment and it is on that basis that I support it. That is also the simple point that I look forward to the Solicitor-General answering.

Mike O'Brien: It is a great pleasure to appear before you for the first time, Mr. Illsley. I am sure that we will have a number of interesting debates in the coming weeks, although I hope not too many weeks. I appreciate that some people might like Committees to go on for longer than I would, but provided that we make progress I see no reason why we cannot enjoy each other’s company before it becomes too stale.
I begin by endorsing many of the points that the hon. Member for Hornchurch made in praise of the benefits of company secretaries. They provide an enormously valuable instrument for the protection of members in particular and, in certain circumstances, of the public. In the case of public companies, company secretaries perform a role that it is necessary and desirable that they should continue to perform. Private companies should have a greater degree of freedom and choice. We believe that that will not lead to any significant problems, and that this deregulatory approach is the better one.
The hon. Gentleman said that there was a great deal of angst, worry and concern among members of ICSA and other organisations about the proposals. I appreciate that ICSA, an organisation that I have had some contact with in the past as a lecturer in law and for which I have the greatest respect, will want to reassure its members. I read the briefing paper with interest, and I hope during the course of my comments to be able to provide some reassurance that its members need not have the concern, angst and worry that he identified.
The essential issue is not, as the hon. Gentleman said, about additional regulation. He was corrected by the hon. Member for Clwyd, West (Mr. Jones), who rightly said that the Conservatives were proposing more regulation than the Government want. The Conservatives want to regulate medium-sized private companies—for want of a better description—rather than small companies. We agree that we should give more freedom to small companies, so the issue between us is in respect of medium-sized private companies. It was correctly identified by my hon. Friend the Member for Broxtowe (Dr. Palmer), who said that it was not about confusion, as the hon. Member for Hornchurch said, but about whether we give greater choice and freedom.
We also want to deal with issues such as subsidiaries that are owned by larger corporations that may be public corporations and subject to obligations to have a secretary. Large public corporations that own private companies should be able to determine the internal management of those companies, provided they comply with the requirements on audit and so on.

David Jones: I hear what the Solicitor-General says, but does not more than the internal organisation of the company have to be considered? Is there not also the company’s dealings with the wider world, and the point that I made earlier about Swire, which has 133,000 employees? Do not companies of that size need the reassurance of a company secretary at the helm?

Mike O'Brien: Unlike the hon. Gentleman, I believe that there should be an element of choice for companies. I suspect that most companies of that size will choose to have a company secretary because it is the appropriate thing to do, and because it will provide the reassurance that they choose to give to those who deal with them and to their members. It is right that they should have that choice.

Justine Greening: Will the Solicitor-General give way?

Mike O'Brien: I will give way to the hon. Lady, but I would like to advance the argument and perhaps give way later. However, if she wishes me to give way now, I will.

Justine Greening: I want to ask the Solicitor-General what the difference is between an unlisted private company and a similar sized or smaller public limited company in that context of choice. I do not understand how the transaction basis on which shares are traded or not traded on a stock exchange has any bearing on the corporate governance levels that are required in the company and in its dealings with external stakeholders on a day-to-day basis.

Mike O'Brien: I was hoping that the hon. Lady would not intervene, as I wanted to come to precisely that point. Let me deal with it briefly now.
Everyone understands the difference between public and private companies—at least everyone who deals with these legal issues. If one creates within that distinction a further distinction—an important one—based on internal financial thresholds of private companies, they create new categories and therefore new consequences and problems. Section 249A as a dividing line adds complexity to these issues.

Jonathan Djanogly: Will the Solicitor-General give way?

Mike O'Brien: May I just deal with the intervention from the hon. Member for Putney (Justine Greening)? I will then give way happily, but I want to make progress with my argument.
In my view section 249A provides a basis on which auditors and accountants can look at companies, but the hon. Lady wants to make a distinction in company law, instead of having the present distinction between private and public companies which is straightforward. Most people understand it, as the hon. Lady obviously does and all members of the Committee do. She wants to create a new category for the purposes of company secretaries to identify that there is a particular new requirement that she wishes to introduce.
Justine Greeningindicated dissent.

Mike O'Brien: The hon. Lady shakes her head, but I am not sure how she can say that she does not intend that.

Justine Greening: It is not a question of understanding. The Government must assume that the people involved in this area are far more intelligent at grasping a lot more about business transactions than just whether a company is a plc or a private company. I fail to see why the level of understanding of the difference between a plc and a private company should have any bearing on the matter. The Solicitor-General has not addressed my original intervention.

Mike O'Brien: Perhaps the hon. Lady will consider that companies grow and companies decline and their financial circumstances will alter. The number of employees they have will alter and other criteria will alter during the course of a year. Some of those companies may not know until after the conclusion of the financial year whether they fit within the category of section 249A or not. They are growing or declining and their circumstances change. To protect themselves, they may decide that whether they go up or down they had better appoint a company secretary. They may have chosen not to do so before, but they may decide to do so now because they will have to comply with the law that the hon. Lady wants to impose. The difficulty is that if they are growing or declining they will not know at the start of the year whether they comply with section 249A.

Justine Greening: It sounds as though the Solicitor-General is arguing for our amendment, which would give companies a clear framework within which to operate and, therefore, simplicity instead of the complexity of having to make predictions about what they thought good corporate governance would be in the private company world before they reach the end of the year.

Mike O'Brien: In that case, the hon. Lady has misunderstood what I said. I said exactly the opposite of what she suggested. I said that the Opposition’s proposal in the amendment would produce precisely the lack of precision and the inability to predict that would cause an undesirable level of complexity. It would create an entirely new category.

Jonathan Djanogly: Will the Solicitor-General give way?

Mike O'Brien: I am engaged in a debate with the hon. Lady and as soon as I have finished that I will give way to the hon. Gentleman with pleasure.
The proposal that the hon. Lady is presumably supporting today is based on criteria in section 249A—her hon. Friend the Member for Hornchurch is nodding his head in agreement—and would impose a set of criteria. That set of criteria would create a distinction between whether a private, medium-sized company must have a company secretary or not. That is the objective of the Conservatives’ proposal and that is precisely what I am saying will lead to lack of precision because a company might not know until the end of the financial year whether it was obliged to comply with that. The point is simple.

Jonathan Djanogly: The Solicitor-General missed the point made by my hon. Friend the Member for Putney. If a company is set up as a public company it needs little more than two directors and paid-up share capital of £12,500. The Solicitor-General made great play of the need not to include medium-sized companies, but a public company could be small or medium-sized, so he has destroyed his own argument.

Mike O'Brien: No. With respect, that is not the case. Of course a public company can be small or medium-sized. I used private medium-sized companies as shorthand to illustrate for the purposes of the debate that the Conservatives were proposing the creation of a distinction between small and larger private companies.
In the case of public companies, such a distinction will also arise. I am not arguing that all medium-sized companies should be in the same category; I am saying something entirely different. I am saying that a plc should be treated as a plc, subject to the requirements that plcs must comply with under the Bill—
Mr. Djanoglyrose—

Mike O'Brien: Will the hon. Gentleman let me finish before he jumps up? I am saying that private companies should be able to make the choice that he would deny them. The Government are in favour of giving private companies a level of choice about how they determine their internal organisation, particularly in appointing a company secretary. I do not accept his proposal that the financial criterion set out in section 249A is the best way to determine the difference between various kinds of private company. I say that that would create confusion. I say that that is unnecessary regulation. I say that the Government want to give private companies greater choice and freedom, and the Conservatives are seeking to deny that.

Jonathan Djanogly: Let me tie that down. Is the Solicitor-General saying that his idea of clarity is that a public company with one employee should have a company secretary, while a medium-sized private company with 260 employees does not need one?

Mike O'Brien: The hon. Gentleman knows very well that a person who wishes to create a publicly listed company with one employee—it happens; it is not impossible—will know that they must comply with certain criteria. It will be a perfectly straightforward, clear distinction that everyone understands. Nobody knows—

Jonathan Djanogly: Will the Solicitor-General give way?

Mike O'Brien: Will the hon. Gentleman let me finish? Nobody can guess the difference between the various criteria that he seeks to identify for private companies. In the case of a public company, which may be listed or not, the Government have made a clear distinction that everyone who creates a public company will understand. They will know that they must have a company secretary. In the case of a private company, they will know that there is an element of choice. That is the key distinction that he seeks to deny. The amendments are essentially regulatory. They will impose regulations on medium-sized private companies by requiring them to have company secretaries.

Justine Greening: Will the Solicitor-General give way?

Mike O'Brien: Let me develop my argument, and then I will give way.
The Government are committed to better regulation. We are opposed in principle to any regulation that is not justified by its benefits. The amendments would require private companies over the threshold to appoint a company secretary.
Company secretaries have certain benefits. They protect members and provide reassurance in particular circumstances to third parties. But do we need to impose a regulation like the one proposed by the Conservatives? It would have to be justified in terms of the needs of medium-sized private companies, and nothing that I have heard from the hon. Member for Hornchurch shows that level of justification. We agree that there is no need to impose company secretaries on small private companies, and we agree that company secretaries are necessary in public companies. We are in agreement.
In order to justify the imposition of that regulation on medium-sized private companies, or—for want of a better description—companies that go above the criteria in section 249A, the Conservatives will have to show that it is necessary for the purposes of the proper running of those companies. They say that choice should be denied, and we say that choice should remain. That is the difference between us.
The hon. Member for Clwyd, West was quite right when he said that the Conservatives are supporting more regulation. That was a welcome level of honesty.
Mr. Jonesrose—
Justine Greeningrose—

Mike O'Brien: I shall not give way. Let me advance my argument, and then I shall give way to Opposition Members with pleasure.
The Bill does not strip away the powers of private company secretaries. However, like all previous Companies Acts, it does not specify the role, functions, duties or responsibilities of a company secretary. Those are matters for the companies themselves. Clause 43 retains the power of any person to enter into contracts on behalf of companies if he or she is
“acting under its authority, express or implied.”
The only powers conferred on the company secretary by Companies Acts are—like those for a director—to authenticate the company’s documents, and to be a co-signatory with a director for the execution of documents by the company. The Bill will give a company the right to appoint one or more individuals as authorised signatories who will be able not only to authenticate the company’s documents, but to execute documents on the same basis as directors. There is room for both the concept of company director and the concept of authorised signatory, as I think that the hon. Member for Hornchurch said last Tuesday. Under the Bill, both of those should be optional for private companies. Unlike public companies, they will be able to have secretaries who are not also authorised signatories. That should be the choice of the private companies.
The Bill goes further by giving all companies the power to appoint an individual as an authorised signatory, and private companies the freedom to decide whether to appoint a company secretary. Clearly, a private company that decides to appoint someone as its secretary can decide also to appoint that person as an authorised signatory. That is its choice. Many will wish to do that, but I expect others to prefer their secretaries not to have that authority. That, too, is their choice. The Bill gives them the freedom to decide. It introduces flexibility and a deregulatory approach that takes account of the widely varying nature of our private companies. We see no need to impose on any private company a requirement to have a company secretary. That is our position.

Justine Greening: I still do not think that the Solicitor-General has made a good argument. Several minutes ago, he said that company secretaries provided members with some protection. I do not understand why members who have invested in private companies of a substantial size deserve less protection—

Eric Joyce: It is a choice.

Justine Greening: It is not a choice that they will have had a chance to make, if they have already invested and then, as a result of the Bill, the company chooses to no longer have a company secretary. They have already invested. So it is not true that they will have hada choice. I do not see any justifiable logic in saying that a company secretary is needed for a plc company of a significant size but not for a private company of a particular size. Either it is worthwhile for a company to have a company secretary, or it is not.

Mike O'Brien: If we take the hon. Lady’s final position—that there is either a logic in the role or there is not—to its logical conclusion, she is essentially arguing that we should have company secretaries in all private companies, big or small. She shrugs her shoulders to indicate that that is her position, but that is not our view or, indeed, that of her Front-Bench colleagues, as she will find. We and her Front-Bench colleagues take the view that small private companies should not be obliged to have a company secretary.

Justine Greening: Will the Solicitor-General give way?

Mike O'Brien: If the hon. Lady will let me answer, I will give way in a minute. The view of those on both Front Benches—there is no distinction between us on this—seems to differ from the hon. Lady’s position, because we believe that small private companies do not need to have a company secretary unless they choose to have one, and that should be their choice. The hon. Lady appears to take a different view, but if she has misstated it, perhaps she can correct that now.

Justine Greening: The Solicitor-General is clearly a master of body language assessment, given that my shrug of the shoulders was taken to mean so much. I fully support the amendments and giving companies a choice whether to have a company secretary. Our point, however, is that the Bill is devoid of any intellectual rigour, because it simply does not say why a company of one size, which happens to have publicly traded shares, needs a company secretary, when a private company of exactly the same size or smaller does not.

Mike O'Brien: Mere assertion—and repetitive assertion at that—does not make for an argument. To repeat the answer that I gave before—the hon. Lady obviously does not accept it, and that is a matter for her, but the rigour of the argument is clear—there is a clear distinction between private and public companies, which we all accept. Anyone who decides to create a public company therefore knows that they will have to comply with certain rules and appoint a company secretary. Anyone who decides to become involved in a private company will have an element of choice that is denied to those in a public company. There is a distinction between private and public companies, and that difference in nature is essentially the reason why it is right that private companies should have an element of choice.

David Jones: Will the Solicitor-General give way?

Mike O'Brien: I will give way once more, but then I will make some progress. I am anxious to give people as much opportunity as they want to get at me, but I want to set out my argument fully and deal with some of the points raised by the hon. Gentleman and his hon. Friends. I will be happy to give way after that.

David Jones: Does the Solicitor-General agree that the fundamental purpose of regulation is public protection? If he does, will he please tell me how it makes for greater public protection to ensure that a small public company has a company secretary, while a large private company employing 133,000 people and with a turnover of £2.3 billion, to take the Swire example again, does not?

Mike O'Brien: The essential difference between a private and a public company is that only a public company can make offers to the public, so the requirement for it to have a company secretary is needed to protect them. To that extent, I think that the hon. Gentleman and I agree. The need for corporate governance is different because of the ability to make offers to people who seek to be shareholders.
There is a clear administrative difference between the natures of private and public companies and a clear dividing line. However, the hon. Gentleman and his Front-Bench colleagues are seeking to impose a very imprecise new criterion to distinguish between different kinds of private company—one that requires a company secretary for all sorts of reasons and another that does not. Given that the criterion is so imprecise, companies that are growing or declining might not have a clue whether they will comply with it in a particular year. Essentially, the result will be regulation by stealth. Companies will need to appoint a company secretary just in case they grow or decline during the coming financial year, because they will not know whether, at the end of that year, they will come within the criteria imposed by section 249A. The hon. Gentleman shakes his head. Can he tell me how a company whose position is quite marginal in terms of some of the criteria outlined and which is growing or declining will know what the company results will be by the end of the year? Such companies would be forced to take precautions, would they not? They would be obliged to appoint a company secretary, would they not? That is why I say that the result would be regulation by stealth. If the hon. Gentleman wants to regulate, fine; let us be open about it. However, he is seeking to create a criterion that is not precise enough. The distinction between private and public companies is very precise, and everyone understands it. No one is in any doubt, least of all he or any member of the public. He is seeking to identify a new criterion, which is a recipe for confusion.

David Jones: The Solicitor-General is making too much of this. The company will be aware when it hits the criterion at the end of the financial year. The situation is as simple as that. Clearly, it will not be required to appoint a company secretary until at the end of the financial year it knows that it has hit the audit level. The Solicitor-General still has not answered my point about public protection. Perhaps he will address that.

Mike O'Brien: I did answer the question about public protection. The essential difference between a public company and a private company is that only a public company can make offers to the public. Therefore, it is necessary to impose a level of regulation on public companies that is not necessarily required to be imposed on private companies.

Jonathan Djanogly: Will the Solicitor-General give way?

Mike O'Brien: I will not—

Jonathan Djanogly: Why not?

Mike O'Brien: Because I have said repeatedly that I want to make progress on the argument. I have given way to the hon. Member for Clwyd, West several times. Let us be fair.
Let me deal with some of the arguments advanced by the hon. Member for Hornchurch, because he raised concerns that have been expressed elsewhere that existing private companies with secretaries that wish to retain them would face a further administrative burden if they wished the existing secretary to be appointed as an authorised signatory. I make it clear that we intend to make the transition to the new regime as easy as possible for existing companies. We shall consult on what the transitional provision should be in respect of such companies. We want to respond positively to the hon. Gentleman’s important point. We intend to ensure that individuals who are private company secretaries immediately before the Bill’s provisions come into force will continue to be able to authenticate documents for their companies and to participate in the execution of documents.
Amendment No. 248 is inconsistent with the provision in clause 253 that frees any private company from the requirement for any private company to have a secretary. The amendment has three parts, which I shall address separately. On the first part, we see no reason why the sole director of a private company should not also be its secretary. As there is no requirement for a private company to have a secretary, it would be unnecessary regulation to place restrictions on who may be the secretary. Such bureaucratic nonsense would lead to the sort of complexity that we aim to strip out of company law, a move that I thought both parties supported.
The second part is similar to section 287(4)(a) of the current Act, but whereas the existing provision refers to a corporation, the sole director of which is the director of the company, the amendment refers to
“a corporation, the sole director of which is secretary to the company.”
The amendment appears to bite only if the company has a joint secretary; otherwise, paragraph (a) does not appear to make much sense.
The third part is not necessary, as clause 140 already provides that every company
“must have at least one secretary who is a natural person”,
so the sole director cannot be a corporation.
Amendments Nos. 185 and 188 would require private companies over the threshold to appoint a company secretary. Having a company secretary would benefit some private companies, and I think that many private companies will decide to appoint one. As we are talking about private companies only, the benefit would go no wider.
Under the Bill, private company directors would be able to appoint a company secretary and the members could require them to do so. The members can choose for themselves. We considered that the decision whether or not to have a secretary should be left to the directors and members of all private companies, regardless of their size.
Amendments Nos. 189, 192 and 204 are consequential on amendments Nos. 185 and 188. Subsection (2) is intended to remove any doubt for third parties that are dealing with private companies and ensures that the company’s decision whether or not to have a secretary does not affect others. Amendments Nos. 249 and 186 would introduce a level of complexity and uncertainty and, in our view, are unnecessary. They would impose costs on third parties.
Amendment No. 187 would conflict with the officer in default provisions under clause 744. It would be worthwhile for the hon. Member for Hornchurch to peruse that. The Bill provides that directors would be liable as officers in default for offences committed by the company. A director would be held to be in default for the purposes of a provision under the Companies Act if he authorises, permits, participates in or fails to take all reasonable steps to stop a contravention. That is not the case for every offence.
The amendment would provide a blanket rule for all offences and obligations under the Act. It would remove any defence to a director being in default and would have the consequence of a director becoming automatically liable for an offence in instances when he arguably has a reasonable defence. That would be disproportionately harsh. It is like the Conservatives deciding to be tough on directors and tough on the causes of directors, not something that they intend, but it would be a consequence of the amendment. It would impose a disproportionate burden on directors and, on that basis, I ask Opposition Members to withdraw it.
As I have explained, the Bill, like previous Companies Acts, does not specify the roles and functions of a company secretary. That will be a matter for the company. The Bill takes matters a step further. It will give all private companies the freedom to decide whether to appoint a secretary. As the hon. Member for North-West Cambridgeshire said, that is little change, in effect, from the functions that the secretary usually performs in so far as those functions are statutory. They will still have to be performed by someone. We are not claiming enormous benefits in respect of the deregulatory measure, but it will be a helpful response to many private companies that wish to organise their internal affairs as they choose.
Matters have been raised about the extent of consultation, who would be consulted and the way in which the policies arose. Opposition Members are familiar with the company law review and the background to it. They will have read the explanatory notes, so I shall not go into how it explored the issues. The 2005 White Paper included proposals to implement that recommendation. The draft clauses were complex, as they addressed the CLR supplementary recommendation that the secretary appointed should have full authority as under the current Act. That complexity was much criticised, not least by the Institute of Chartered Secretaries and Administrators.
The responses to the White Paper were fairly evenly split. Eight welcomed or supported the proposals, including the Federation of Small Businesses, the Law Society, the Confederation of British Industry and the Institute of Chartered Accountants in England and Wales. Previously, the Law Society and the CBI had been opposed to the proposals. Eight opposed them, including ICSA and the Institute of Directors; five were broadly neutral and three did not comment significantly on the policy. Given that the main beneficiaries of the Bill will be private small companies, our view was that we should move forward with the proposals.
A number of other points were raised by the hon. Member for Hornchurch. I will go through them reasonably quickly. The hon. Gentleman spoke about the shell listed plc with a secretary, with hundreds of subsidiaries, all trading, that would not need a secretary because they are private. The parent listed company will have to produce group accounts and reports in the normal way, which is what matters to the public. Even if the parent company does not actively trade, the responsibility will lie with it.
The hon. Gentleman raised issues about all private companies being able to have a secretary for internal matters. It is the case that there is no change here. If they want a company secretary they can have one. For all external matters private companies will have a straightforward choice: they can have no secretary, or a secretary able to sign and authorise documents, or a company secretary not able to sign and authorise documents. That will be a matter for them. Others may also have authorisation from the company to sign—again, that will be a matter for the company.
The hon. Member for Hornchurch said that a company secretary is an officer of the company by virtue of section 744. He is an officer, but it is not section 744 that makes an officer of the company. Companies are free to create officers. There is no general great legal significance. We do not believe that it makes someone an office holder in the sense in which that applies. For example, in employment law a company secretary ceases to hold office when removed in accordance with the articles of the company—that is, normally by the directors or maybe by the members, depending on the circumstances.
The hon. Gentleman raised a point in relation to clause 640, which I will deal with briefly. I do not think that I accept his point about a lacuna existing in clause 640, but I will have a look at that and explore it. At the moment our view is that directors in the public company sector and other officers in default can commit the offence. Directors in the public company sector in office when the return was due to be made commit the offence unless they prove that they took all reasonable steps to avoid the offence. For other officers in default and anyone who took office subsequently, an officer is liable only if he or she is in default—that is, if he or she is authorised or permitted. Of course they will need to be authorised or permitted, and they must have participated in or failed to take all reasonable steps to prevent the offence being committed.
I think that I have dealt with most of the points raised. I have made a note here about some of the points raised by the hon. Member for Clwyd, West and to some extent the point raised by the hon. Member for Putney, but I think that I have waxed eloquent on the distinction and made my point. I will add just one more. It would appear that many of the private companies that are over the audit threshold are in fact wholly owned subsidiaries of public companies and our view remains that the internal administration of those companies is best left primarily to them.
In essence, what we have here is a clear distinction between the Government and the Opposition. That distinction is on whether to impose a level of regulation on the larger private companies or to allow them an element of free choice about whether they have a company secretary. That, in essence, is the issue. We take the view that private companies are different in nature and, to that extent, they should be able to choose whether or not to have a company secretary. The Conservatives take the view that larger private companies are not in a position where they should be able to have that choice. The Conservatives wish to impose more regulation on them than the Government do. That, in essence, is the distinction.
My chief concern is the means. I understand why the Conservatives have gone for those criteria that they are seeking to make the judgment on. Basically, it is necessary to have something and there are no other useful criteria that one could choose. I can see why the hon. Member for Hornchurch, or whoever, would have chosen that particular section, which does create an element of distinction. But section 249A also creates a level of complexity and confusion for companies that may during the course of their year move up or down and not know whether they are in compliance or not.
I do not accept that the best way of dealing with the matter is to apply to appoint a company secretary in any event. We take the view that that element of choice should remain with the private company or with those who control it. That is therefore a fundamental distinction between us. We are best sticking to a clear distinction on the nature of companies, so that everyone understands the difference between public and private companies. That distinction is one to which we can, and should, all adhere. [Interruption.] I am being asked to give way, and I do.

David Jones: I am most grateful to the Solicitor-General for giving way once again. In those circumstances, does he still consider that private companies with an annual turnover of more than £5.6 million need to be subject to an audit?

Mike O'Brien: There is a need for private companies that are above a certain size to comply with all sorts of things. The question is whether a company secretary has to be one of them. The distinction between the hon. Gentleman and I is that he would wish to impose what I believe to be an unnecessary burden on those larger private companies. He would say that they must be regulated in a way that I do not think is necessary. He obviously thinks that it is necessary and he is entitled to that view, but it is a clear distinction between us. He has been honest throughout this debate; unlike some others who have suggested that this is not regulatory, he says yes, it is more regulatory because it is necessary to regulate more. I accept that that is a very straightforward position.
Others have suggested—and got themselves into a bit of a mess by doing so—that the obligation is deregulatory. It is not deregulatory; it is more regulatory. There may be arguments for it but they are not very good. That is why the Government would prefer to stick with the position that we have set out in the Bill.

Jonathan Djanogly: The Minister refused to give way to my earlier intervention, so before my hon. Friend the Member for Hornchurch replies to the Minister I want to put one point on the record about the relationship between corporate governance and the size of the company. The Solicitor-General made great play about the difference between a private and a public company—that a public company can make an offer to the public. On that basis he justified the need for a public company only to appoint a company secretary and to need the corporate governance protection that having a company secretary implies.
That is a somewhat narrow view of corporate governance, because a private company may have many hundreds of members. Indeed, it may be an old public company, which offered shares to the public but which now does not need to do so. But with hundreds of members, corporate governance in a private company will be very important. In some ways it will be more important that such a company adopts good corporate governance procedures because it is not forced to do so. Furthermore, corporate governance goes much further than the company’s relationship with its members, or its future members; it goes to other issues such as the company’s relationship with suppliers, employees and community interests. I submit that the corporate governance importance of the large private company will be just as great if not greater than if the company is simply public.

Margaret Hodge: I do not think there is much disagreement about the statement that the Opposition spokesman, the hon. Member for Huntingdon, made. But there is an oddity in his assertion. We will consider a range of amendments, if we get to them, on the subject of the percentage of members who are required to have resolutions and so on.
The Opposition Members are raising the stakes;they have tabled amendments proposing 5 per cent. to 10 per cent. To me, the key corporate governance issues provide the sort of probity that is wanted. Yet we are being asked to consider the issue that corporate governance depends on whether we impose on companies of a certain size the rigidity of having to have a particular employee with a particular conscience. That is an odd way of defining corporate governance, on much of the definition of which, in theory, I am in agreement with the hon. Gentleman.

Jonathan Djanogly: The Minister makes her point and I will not put this into the context of this and every other clause in the Bill, as she tried to do.

Margaret Hodge: Consistency.

Jonathan Djanogly: No. We take these clauses on a one-by-one basis and look at what is appropriate in the circumstances. Surely the Minister will appreciate that. Again, I do not want to make a series of points; I just want to make a specific point on corporate governance. The issue is much more than whether the company is public or private, and the size of the company will often be relevant to the level of corporate governance that is required.

James Brokenshire: We have had a good debate on company secretaries and their continuing role within either the public or the private company environment. The hon. Member for Cheadle made an important point, recognising the role and importance of the company secretary, and also recognising the point that my hon. Friend just made about the need to look not only at the company itself, but externally at the continuing roles and functions.
The hon. Member for Broxtowe touched on the regulatory/deregulatory issue. Although I recognise that private companies are being given a choice, our amendments would mean less regulation on either side because all companies currently have to have company secretaries. It is a bit of a false argument to say we are being more regulatory, because we already have company secretaries.
My hon. Friend the Member for North-West Cambridgeshire emphasised the deregulatory nature of whatever approach we take. He made an important point about the involvement of directors. If the role of the company secretary, whether intended or not, is downgraded or downplayed in a private company setting, directors will become more involved in the day-to-day administrative matters and that may cause problems. ICSA identified that problem in relation to good corporate governance, which might be threatened in some way.
My hon. Friend the Member for Clwyd, West talked about reassurance and how, from the corporate governance perspective, it is important to have certainty for a particular size of company. In some ways, that is where the dividing line is drawn in terms of when it is appropriate to require a company to have a secretary or not. The Government say that the dividing line is a plc, as compared with a private company. We think that we need to be more sophisticated and take a different view. It is the size and scale of operations that matters, not an artificial definition of whether something is a plc or a limited liability company because of the nature of the activities that are undertaken. I suppose that that is the dividing line between our two differing approaches.
My hon. Friend the Member for Huntingdon pointed out that some plcs will have outside shareholders, too. Although the Solicitor-General is right that a limited liability company cannot make an offer to the public, certain other offers can be made in a private placement which could bring in institutional investors, and there could be a limited number of high net worth individuals who might invest in a private company. In some ways, they may have a lesser protection if a very clear dividing line is drawn between the plc and the limited liability. That is certainly the distinction that I would draw.
The Solicitor-General tried to brush aside the plc versus private company issue, but private companies with a significant number of shareholders might not be family companies and might have outside interests. It is better to look at the distinction in terms of financial issues, and that is why the amendments are drafted in such a way. To be fair to the Solicitor-General, he eventually framed the distinction in a high-blown way, but we would distinguish it on the basis of the turnover threshold, as identified in our amendments.

Mike O'Brien: The hon. Gentleman made a reasonable point about the way in which an offer can be made by a private company. Indeed, it might attract institutional investors, but surely the response to that must be that the institutional investors or others, if they intend to invest in a private company and seek the protection of the company secretary, will be able, in the course of negotiations, to say, “If you want my investment, I want the satisfaction of the protection of a company secretary.” It will be a matter for the company and those who seek to invest in it to choose whether they want that level of protection.

James Brokenshire: The Solicitor-General makes an interesting point. That is why I talked about the provision creating burdens. He made a good argument for the fact that additional costs and burdens are being created. We all understand what a company secretary is at the moment, whereas in such circumstances an investor will say, “Okay. This is a limited liability company. I want it treated as a plc.” The lawyers will have to be brought in and additional costs racked up to put that into the articles. That is additionally burdensome. His point about what additional burdens might be created in such circumstances was well made. That is what I mean when I talk about the burdens.
I welcome the Solicitor-General’s comment about transitional arrangements and the transitional situation with existing company secretaries, but the problem is that if a group is large and has a number of different subsidiaries, it is possible for new subsidiaries to be formed all the time. As of today’s date, the company secretary of a large group will have to create that position in the new subsidiaries to maintain the status quo. That brings an additional level of complexity. They will have to ask whether the limited liability company was in existence prior to the Bill and whether he or she was company secretary at the time, or whether it was a limited liability company for which they were not company secretary at the time, or which was not formed prior to the Bill. Within large groups, there is likely to be a level of complexity that the Solicitor-General perhaps glossed over in some of his comments.
I am talking about burdens and regulation. ICSA and its members are concerned about the regulatory requirements that might be created as a consequence of the construct that has been created by the Bill. We touched on the fact that plcs they can be small and not necessarily listed. It is interesting that the Government want to maintain that line, rather than take our approach with the turnover threshold.
I note that the Solicitor-General emphasised the authorised signatory situation and said, “Look, you’ve got the choice. If you want to create a company secretary, that is fine, but it is up to you to go and create that role, to make them authorised signatories, to give them authority, and everything like that.” I hear what he says, and that might be suitable for small companies who might say that they do not need a company secretary. I think that we are in agreement on such cases. There are clearly situations when a company secretary might be inappropriate and unnecessarily burdensome, such as in a small, family-run company. We are not arguing at all on that point.
It is a question of where we set the benchmark from a corporate governance perspective and from the external perspective of what people who deal with a company and who might become shareholders expect. Although I hear what the Solicitor-General says about it all being terribly regulatory, I do not accept that. The Government are accepting the requirement to have company secretaries in plcs, so one might say that they are being over-regulatory in that way. If they believe so fervently that company secretaries are an unnecessary burden, perhaps they should have got rid of them altogether.
I think that the Government rightly recognise the value of company secretaries in ensuring good corporate governance. That is why they sought to retain them in a plc context, but it should not be viewed in that context alone. For medium-sized and larger companies, it is appropriate to expect that standard of behaviour and for corporate governance to apply.

Mike O'Brien: It is the case that, particularly in public companies, a company secretary will be a necessary level of protection for members and third parties. It is also the case, however, that many private companies will choose to have a company secretary. That will be to their benefit and it is right that they should have that choice. The essential difference—the hon. Gentleman is glossing over it—is that we want to provide an element of choice, particularly for larger private companies and he wants to deny them that choice. I am still waiting for the argument that will explain why we must have regulation.

James Brokenshire: With all due respect to the Solicitor-General, I have made that argument. It is about what external people who deal with the company can expect. It is all very well saying that the company must have choice, but there comes a time when consideration must be given to the members and shareholders of the company, its creditors and third parties, and to what they may expect. It is a false argument to say that the matter concerns the company alone. We must look at the context of the company, where it sits in its dealings, and how that works in practice.
I note that the Solicitor-General will return to the point about section 640, which I raised in the context of whether secretaries are officers of companies. I note also that he said that that does not necessarily derive from section 744, which defines an officer for the purposes of the 1985 Act and specifically lists a secretary as being an officer in that context, from an interpretive point of view, to give clarity. In relation to section 744, I am not sure whether that will be entirely reflected in the Bill when it is finalised and we have all the definitions and so on lined up. I seek clarity on whether that will appear in it.
The Solicitor-General said that companies can create officers without statutory authority, but we need to be clear whether someone is an officer or not. The current mechanism of having a secretary whose name appears on the record at Companies House provides that clarity and the standing for that individual to be able to ensure compliance at board level. That provides added weight and credibility. It may be possible for a company to create an officer in the way that he describes, but because company secretaries do not have the back-up of registration at Companies House and in the record of third parties, their position is not properly recognised and their standing is lessened in the eyes of third parties.

Jonathan Djanogly: My hon. Friend makes a powerful contribution. The important word is “standing”. Many company secretaries have written to us about the loss of standing that they believe they will suffer as a result of the proposals. At the heart of that is their position as an officer of the company.

James Brokenshire: My hon. Friend makes a powerful point. What concerns us is the liability that goes with an officer’s position. I want to put that in context in relation to section 640, because the way in which it is drafted provides a defence for a secretary of a public company that is not available to a secretary of a private company. I note that the Solicitor-General will come back to us on that. My point is genuine and I am not trying to raise false problems. That needs to be examined carefully and it puts into context the status of secretaries, whether they are officers and what liability they may have in that regard.
In closing, I want to encapsulate two lines of argument that we have developed and which have not been distilled out. Most of the debate has been in connection with the pure issue of whether we should have company secretaries for plcs as against whether we should have company secretaries for medium or larger-sized private companies.
There is a further line of argument, in that if the Government are not minded to accept our position in insisting that medium-sized or larger private companies should have a secretary, there is the residual issue of the standing of a secretary. I note that the issue comes through clearly in ICSA’s latest briefing note. It is concerned that if additional language is not built into the Bill, the standing of a secretary will be diminished in some way.
Even if we were to accept the Government’s argument about limited liabilities having the choice of whether to appoint a secretary, the further point is, first, that that should be given recognition by Companies House and, secondly, that there should be some recognition in the Bill of where a secretary sits, either as an office holder or more generally. It is that absence, what it will mean and the point about administration moving forward that is causing disturbance, distress and—to repeat the language that I employed in my opening comments—anxiety among existing company secretaries.
There is a question where we set the dividing line. I hear what the Solicitor-General said and clearly we are at variance on that. There is also the point about the recognition of private company secretaries, if a company chooses to adopt that route. That point should be not underestimated, ignored or glossed over, because it is serious and needs to be examined carefully, but it has not been addressed properly by the Government to date.
In light of that, I would like to press the amendment, which concerns where we set the dividing line, to a Division. Separately, I should also like to press to a Division amendment No. 249, which concerns the secondary issue that I have raised on the need for some recognition of private companies’ secretaries in the Bill. Private companies’ secretaries play a significant role in our corporate environment. That their role appears to be being downgraded is a shortcoming of the Bill. That role should be protected; I shall therefore press those two amendments to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 8, Noes 11.

Question accordingly negatived.

Amendment proposed: No. 249, in clause 253, page 117, line 28, after ‘company', insert
‘that does not have a secretary'.—[James Brokenshire.]

Question put, That the amendment be made:—

The Committee divided: Ayes 8, Noes 11.

Question accordingly negatived.

Clause 253 ordered to stand part of the Bill.

Clause 254 ordered to stand part of the Bill.

Clause 255

Direction requiring public company to appoint a secretary

James Brokenshire: I beg to move amendment No. 191, in clause 255, page 118, line 29, at end add—
‘(8) Nothing in this section shall entitle the Secretary of State to question whether a secretary of a public company satisfies the requirements of section 256.'.

Eric Illsley: With this it will be convenient to discuss the following: amendment No. 266, in clause 256, page 119, line 12, at end insert—
‘(h) the Association of Accounting Technicians.'.
Clause 256 stand part.

James Brokenshire: Amendment No. 191 relates to the power of the Secretary of State to give directions to a public company in connection with its requirement to have a company secretary. Clause 254 states:
“A public company must have a secretary.”
Clause 255 provides the Secretary of State with a mechanism for maintaining compliance. However, clause 256 sets out certain requirements that a public company secretary should fulfil. I do not want to take up the Committee’s time unduly, but it might be worth looking at clause 256(2):
“The qualifications are—
(a) that he has held the office of secretary of a public company for at least three of the five years immediately preceding his appointment as secretary;
(b) that he is a member of any of the bodies specified in subsection (3);
(c) that he is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom;
(d) that he is a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging the functions of secretary of the company.”
Paragraph (d) emphasises that there is some flexibility on the part of the company in determining whether a person meets the criteria. The amendment therefore probes the interrelationship between clauses 254 to 256 to ensure that the direction-making power of the Secretary of State cannot be used to question or challenge a company’s decision as to whether a valid appointment has been made for the purposes of the qualifications in clause 256 and therefore whether clause 254 is satisfied.
Amendment No. 266 raises a separate issue. It seeks to probe the review undertaken to draw up the list of relevant organisations included in clause 256(3), and which are treated as satisfying the requirements in clause 256(2)(b), which I read out a few moments ago. The amendment proposes to include the Association of Accounting Technicians on the list. We have been contacted by the AAT, which set out why it believes that it is an appropriate body for inclusion. I make no specific comment or argument whether it is appropriate, but it raises the question whether the list has been reviewed and what flexibility there will be to amend the list, either formally through the Bill or through guidance that could be incorporated indirectly under clause 256(2)(d).

Lorely Burt: I rise simply for a point of clarification, as we are without the good offices of our expert Member this afternoon. During our long and fascinating debate earlier, I was reading the explanatory notes, which say:
“There is no requirement for the company secretary to be a natural person.”
Must that person be an unnatural person? That would create concern, and the Liberal Democrats would not be able to support the clause if it were the case.

Mike O'Brien: I reassure the hon. Lady that because, in law, corporations are persons, the distinction must be made between individuals—natural persons—and corporations. She need not fear, although I do not wish her to support the amendment and I hope that it will be withdrawn.
Clause 255 provides the Secretary of State with the power to issue a direction only if the public company is in default of a requirement to have a secretary. It does not provide for the Secretary of State to consider the suitability or qualifications of any appointment. It is a matter for the company whom it wishes to appoint and whether a particular secretary and their qualifications are suitable. I hope that on that basis, the hon. Gentleman will feel able to withdraw amendment No. 191.
I turn to amendment No. 266. The Bill follows the 1985 Act in specifying only a list of various organisations. The Government’s view was that we could have widened the group, but that the issue would then become where to draw the line. At the moment, we will stick with the position as it is. However, I point out that the list of bodies in subsection (3) is not exhaustive. Any company that wishes to appoint a member of the AAT as a company secretary should be able to do so. I am sure that that organisation is very reputable; I have read the background information on it. Subsection (2)(d) provides that if it appears to the company directors that the member of any other body is capable of discharging the functions of company secretary, that person can be appointed. On that basis, I hope that the hon. Gentleman will feel able to withdraw the amendment.
The provision dates back to the Companies Act 1980. Although it seems to restrict eligibility for the position of company secretary of a plc, there is little restriction on who may be appointed as long as that person appears to the directors to have the requisite knowledge and experience. The criterion is what the directors think. Nevertheless, we think it useful for directors to have a list of bodies whose members are considered capable of discharging the functions of a plc secretary.

James Brokenshire: I am grateful to the Solicitor-General for that explanation. I am reassured by his comments that the current regime concerning the Secretary of State’s involvement in any challenge whether a plc has an appropriate company secretary or not is being maintained, that the list prescribed in clause 256(3) is not intended to be prescriptive in relation to clause 256(2)(d) and that directors’ flexibility to determine whether someone is appropriate to fulfil the role of company secretary will therefore be maintained as it is under the Companies Act 1985. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 255 ordered to stand part of the Bill.

Clauses 256 and 257 ordered to stand part of the Bill.

Clause 258

Duty to keep register of secretaries

James Brokenshire: I beg to move amendment No. 193, in clause 258, page 119, line 22, leave out ‘public company' and insert
‘company which is required by section 254 to have a secretary or which, although not so required, has a secretary '.

Eric Illsley: With this it will be convenient to discuss the following amendments: No. 194, in clause 259, page 120, line 2, leave out ‘public company' and insert
‘company which is required by section 254 to have a secretary or which, although not so required, has a secretary '.
No. 197, in clause 260, page 120, line 18, leave out
‘A public company's register of secretaries'
and insert
‘The register of secretaries which is required to be kept under section 258'.
No. 202, in clause 261, page 121, line 2, leave out
‘A public company's register of secretaries'
and insert
‘The register of secretaries which is required to be kept under section 258'.
No. 203, in clause 262, page 121, line 27, leave out
‘A public company's register of secretaries'
and insert
‘The register of secretaries which is required to be kept under section 258'.

James Brokenshire: Amendment No.193 deals with clause 258 regarding the duty to keep a register of secretaries, which is the internal requirement on a company. It is a flexibility amendment that follows the line of argument in the previous debate on statutory recognition of company secretaries and private companies.
Amendments Nos. 197, 202 and 203 make consequential amendments to clauses 260 to 262 to reflect that change. Therefore, in light of the previous debate, I do not intend to spend any further time on explanation.
Amendment No. 194 raises the matter of similar flexibility in clause 259. It concerns the duty to notify the register of companies on changes to the secretary and the appointment of a new secretary. As currently drafted, that requirement is limited to public companies.
Under the amendment, that requirement would be extended to companies that have a secretary. It would make it clear to the outside world whether a private company has a secretary or not and who the office holders of the company are. It would also seek to address the point that I highlighted earlier about existing secretaries of private limited companies who may wish to come off the record, providing a mechanism to enable them to do so. That is an important point.
The enabling of the registration of private companies is endorsed by ICSA, the CBI, the Institute of Directors, the Association of Corporate Treasurers and the Law Society. It would afford protections for existing and new secretaries from authority and potential liability. It would involve the simple completion of a form with the registrar and would clarify who the office holders of the company are.
I maintain that it would be important for transparency to appoint a secretary to a private company. It would assist good corporate governance in terms of the interrelationship between a private company and the external parties with whom it dealt.

Mike O'Brien: The Committee has already agreed to our proposals on authorised signatories. That means that the public record will include the particulars of those authorised to sign for any company—essential third parties—whether public or private.
Under the 1985 Act, the company secretary may authenticate company documents and be a co-signatory for the execution of documents. Under the Bill, under amendments already agreed by the Committee, a company secretary, if an individual, will continue to be able to perform the external role, providing that their particulars are on the public record.
Although many public companies appoint individuals as their secretaries, some will want secretaries to have that authority, some will not. It is up to them; we have discussed that. If the company does not want its secretary to have the authority, there is no reason why the secretary’s particulars should be publicly available. The Bill ensures that entries in the public record are required only if the information is truly needed.
However, under the amendments, the details of all private company secretaries would have to be put on the public record, whether or not the secretary was able to authenticate documents for the company and to sign for the execution of documents. Such a requirement would be another unnecessary burden on private companies. It would have serious practical implications in the real world. It would be inevitable that many private companies that had notified the appointment of a secretary would neglect their statutory duty to notify that the person had ceased to be secretary.
That would be particularly likely if the secretary was not replaced by another and if the appointment had not ended amicably. That would mean that the public record would be seriously defective. Furthermore, entry on the register would have legal consequences as such errors would have consequences that might put some people in the company at risk. It is not right to expose companies to that risk. Therefore, I hope that the hon. Gentleman will feel able to withdraw the amendments and that we will be able to move forward.

James Brokenshire: I have listened to what the Solicitor-General has said. Earlier in this sitting, we debated the matter of company secretaries in great detail. However, I do not accept that the amendment would impose an additional regulatory burden. The appointment of a company secretary in a limited liability company must be notified now. Nor do I accept that the amendments would add to confusion. They would provide a formal mechanism to allow company secretaries to come off the record, and I do not see how that would add to confusion. Having the secretaries of limited liability companies on a public register is an important issue, and we may well want to return to it later.

Mike O'Brien: I hear the hon. Gentleman’s point, and perhaps I can look at it as part of the examination of transitional provisions.

James Brokenshire: I am grateful to the Solicitor-General. In light of that comment, I shall reserve our position at this stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

James Brokenshire: The clause refers to the register of secretaries being open to inspection to any person
“on payment of such fee as may be prescribed.”
How will that fee be prescribed? What regulation will there be in that respect? How will we ensure that the fee is not abused in some way to deny access to the register?

Mike O'Brien: Clearly, any fee would have to be reasonable, and we will look at provisions on how we determine that. The objective is to ensure that persons can gain access to information, and the registrar can prescribe various requirements. Clause 721 states:
“The Registrar may impose requirements as to the form, authentication”
and the various ways in which the various forms are to be issued. The aim is that the registrar will have rules that set out the prescribed fee, so there will be some element of regulation to prevent someone from deciding that the fee will be so large as to prevent access.

James Brokenshire: I am interested by the comment that the registrar will prescribe the fee, because that might be slightly different from the existing situation. The public company will maintain the record itself, but I should have imagined that the Secretary of State would regulate the fee, if that was the intention. However, I will guided by the Solicitor-General on that.

Mike O'Brien: The Secretary of State will indeed decide the fee, but the aim is that that should be set out in the registrar’s rules so that it is clear.

Question put and agreed to.

Clause 258 ordered to stand part of the Bill.

Clause 259

Duty to notify registrar of changes

James Brokenshire: I beg to move amendment No. 195, in clause 259, page 120, line 5, after ‘notice', insert ‘in the prescribed form'.

Eric Illsley: With this it will be convenient to discuss amendment No. 196, in clause 259, page 120, line 7, after ‘consent', insert ‘signed'.

James Brokenshire: The amendment deals with clause 259, which relates to the duty to notify the registrar of changes to company secretary’s details.

Mike O'Brien: It may save the hon. Gentleman some time if he looks at clause 721, which is entitled “Registrar’s requirements”. It provides:
“The registrar may impose requirements as to the form, authentication and manner of delivery of documents”,
so neither amendment is needed.

James Brokenshire: I am grateful for that clarification because I was trying to get at how notification would be given. Obviously, it is currently done on form 288. Previous comments about resolutions to change the company name seem to suggest that more informal requirements might be adopted on whether a specific form would be required. I take it from the Solicitor-General’s comments that that may become clearer in regulations set out by the registrar in terms of the form in which such matters are set out. The Solicitor-General may wish to make further clarification points in that regard.

Mike O'Brien: The hon. Gentleman is right in that the registrar will impose any requirements and it will be for the registrar to determine how that can be done most efficiently and effectively. That is probably a better approach than trying to impose everything by detailed regulation here.

James Brokenshire: Obviously, the concern behind all this is to ensure that when we talk about authentication we are mindful of the issues that we debated last week and the ways in which companies can be hijacked by people purporting to have authority and filing registration forms and so on. That is of concern to me and other Opposition Members, and I am sure that the Government are concerned about what might be reflected in terms of detailed consideration of the relevant proposals. That is the context in which the amendments were tabled: to ensure that hijacking and fraud were appropriately and adequately dealt with. I hope that the Government will continue to reflect on the matter so that we have a robust system that does not expose companies to the risk of being hijacked by third parties with malicious intentions, or limits that risk as much as possible.
In light of the Solicitor-General’s comments, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

James Brokenshire: I have one further point for clarification. Obviously, the clause deals with notification of changes in relation to public company secretaries. Could the Solicitor-General clarify what might happen at Companies House if a private company sought to notify the registrar of a change or appointment of a company secretary? How would Companies House and the registrar of companies treat that? Is it likely that they would simply reject it, or would they reflect it on the register?

Mike O'Brien: Companies House would not be involved. It would essentially be for the private company to decide whether it wished to take a view and, therefore, it would be rejected. That is essentially the position. It will be a matter for the company.

James Brokenshire: I am grateful for that response, but I can envisage that if the existing regime is maintained private companies would still seek to notify the registrar of companies as they have done historically in relation to appointments and changes. The purpose of my question was to allude to the fact that that is recognised and to ask how the registrar would respond and whether a formal notification would simply be rejected and sent back to the private limited company. In many ways, that goes back to my point about putting things on the record and providing choice. I hear what the Solicitor-General said about rejection on the basis of the current arrangements.

Question put and agreed to.

Clause 259 ordered to stand part of the Bill.
Further consideration adjourned.—[Steve McCabe.]

Adjourned accordingly at twenty-nine minutes past Seven o’clock till Thursday 29 June at Nine o’clock.